{"id":1203,"date":"2014-06-11T16:36:36","date_gmt":"2014-06-11T13:36:36","guid":{"rendered":"http:\/\/oilnewskenya.com\/?p=1203"},"modified":"2015-09-09T10:10:53","modified_gmt":"2015-09-09T10:10:53","slug":"citi-warns-tullow-oils-debt-build-up-could-delay-production","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/citi-warns-tullow-oils-debt-build-up-could-delay-production\/","title":{"rendered":"Citi warns Tullow Oil’s debt build-up could delay production"},"content":{"rendered":"

Source: Business Daily<\/a><\/p>\n

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London Stock Exchange-listed Tullow which has discovered oil in Turkana County should sell part of its stake to raise money for production, analysts at Citigroup Global Markets say in their latest report.<\/p>\n<\/div>\n

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The analysts caution that delays in injecting cash would hold back production in Kenya, Uganda and Ghana.<\/p>\n<\/div>\n

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\u201cA failure to farm-out its current high equity stakes in its future developments could see a delay in the development timetable for some of these projects,\u201d said Citi in its latest report titled Detailed Review of Tullow\u2019s Exploration and Production Portfolio.<\/p>\n<\/div>\n

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The investment bankers, who say they held discussions with the Tullow Oil management prior to producing the report, see export of oil likely to start from 2019. However, it warns that further build-up in debt could delay commercial development. Tullow has already discovered some 600 million barrels of oil in Kenya.<\/p>\n<\/div>\n

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Tullow Oil holds a 50 per cent stake at Block 10BB in the Lokichar basin where several wells have yielded oil, with Canadian-owned Africa Oil holding the other half.<\/p>\n<\/div>\n

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The report forecasts that if there is no share sale, the company\u2019s gearing, the ratio of net debt to equity, would reach 80 per cent by 2017.<\/p>\n<\/div>\n

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Such a debt would consume 2.4 years of the company\u2019s earnings before tax, interest, taxes, depreciation and amortisation (EBITDA).<\/p>\n<\/div>\n

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\u201cAssuming no farm-outs, we see net debt\/EBITDA peaking at 2.4-times in 2016 on our oil price deck (of $90 per barrel) and gearing (or net debt to equity ratio) peaking at 80 per cent in 2017,\u201d said the investment bankers.<\/p>\n<\/div>\n

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The analysts also see the company\u2019s LSE price-to-earnings (P\/E) ratioimproving to 29 by 2015 and to 22 in 2016, meaning investors can recover their money in a shorter period. This implies the company\u2019s share price will surge at a faster pace.<\/p>\n<\/div>\n

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The investment bankers estimate that the net dividend yield will rise marginally from 1.3 per cent last year to 1.4 per cent this and next year before rising further slightly to 1.5 in 2016.<\/p>\n<\/div>\n

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Production in Kenya, the analysts said, will focus on the planned development of the discoveries at the Lokichar Basin, where most of the wells have been found to have oil.<\/p>\n<\/div>\n

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\u201cDespite two recent disappointing well results at Emong and Ekunyuk, we believe there is a sufficient resource base to underpin a commercial development. \u2026We assume about 750-800 million barrels,\u201d said Citigroup. Already, 600 million barrels have been confirmed.<\/p>\n<\/div>\n

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The investment bankers said drilling of the Etom prospect \u2014the largest undrilled structure in the Lokichar area \u2014later this year could see the resource base increase to about one billion barrels.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Source: Business Daily London Stock Exchange-listed Tullow which has discovered oil in Turkana County should sell part of its stake to raise money for production, analysts at Citigroup Global Markets … Read More<\/a><\/p>\n","protected":false},"author":2,"featured_media":14,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[6],"tags":[259,466,467,572,723,736,813,1445,2571],"class_list":["post-1203","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-by-others","tag-block-10bb","tag-citibank","tag-citigroup","tag-debt-to-equity-ratio","tag-ekunyuk","tag-emong","tag-etom","tag-lokichar-basin","tag-tullow-oil","entry"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2013\/12\/tullow.jpg?fit=276%2C182&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5JWkQ-jp","jetpack-related-posts":[{"id":1510,"url":"https:\/\/www.oilnewskenya.com\/index.php\/tullow-oil-africa-oil-signals-possible-farm-out-in-kenya\/","url_meta":{"origin":1203,"position":0},"title":"Tullow Oil, Africa Oil signals possible farm out in Kenya","author":"Samuel Kamau Mbote","date":"July 28, 2014","format":false,"excerpt":"[twitter-follow screen_name='oilnewskenya'] Tullow Oil and its partner Africa Oil may be farming out blocks 10BB and 13T in the Lokichar basin and where the companies have already discovered oil reserves in excess of 600 million barrels. According to Africa Oil CEO Keith Hill in an interview with Reuters the plans\u2026","rel":"","context":"In "Top News"","block_context":{"text":"Top News","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/top-news\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3856,"url":"https:\/\/www.oilnewskenya.com\/index.php\/bharat-petroleum-eyes-tullow-oils-kenya-acreage\/","url_meta":{"origin":1203,"position":1},"title":"Bharat Petroleum eyes Tullow Oil\u2019s Kenya Acreage","author":"","date":"September 28, 2015","format":false,"excerpt":"India\u2019s Bharat Petroleum Corporation (BPCL) is rumoured to be in talks with Tullow oil to acquire 10 percent stake in Blocks 10BB and 13T where the London explorer has discovered over 600 million barrels. According to India\u2019s Times news\u00a0website reports that BPCL could be ready to cough about\u00a0 $2.7 billion\u2026","rel":"","context":"In "Top News"","block_context":{"text":"Top News","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/top-news\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2015\/09\/Bharat_Petroleum_Logo.svg_.png?fit=826%2C1024&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2015\/09\/Bharat_Petroleum_Logo.svg_.png?fit=826%2C1024&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2015\/09\/Bharat_Petroleum_Logo.svg_.png?fit=826%2C1024&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2015\/09\/Bharat_Petroleum_Logo.svg_.png?fit=826%2C1024&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":2009,"url":"https:\/\/www.oilnewskenya.com\/index.php\/ongc-videsh-ready-to-buy-tullow-oil-african-assets-in-kenya-or-ghana\/","url_meta":{"origin":1203,"position":2},"title":"ONGC Videsh ready to buy Tullow Oil African Assets in Kenya or Ghana","author":"Samuel Kamau Mbote","date":"November 6, 2014","format":false,"excerpt":"India\u2019s overseas investment arm of Oil and Natural Gas Corp ONGC Videsh might be looking into farming into Tullow Oil assets in Ghana and Kenya according to news reports by online.wsj.com attributed to ONGC\u2019s director of exploration Anil Bhandari and Reuters who quote an anonymous source. 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